The ACT will remove stamp duty from general and life insurance from July 1 next year, tomorrow’s budget will show.

“The 2015/16 budget will be the last year of duty on general and life insurance in the ACT,” Treasurer and Chief Minister Andrew Barr said.

In June 2012 the ACT Government began a five-year phase-out of its 10% duty on general insurance and 5% duty on life premiums, reducing them by two percentage points a year and one percentage point a year respectively.

“Insurance duties are widely recognised as being inefficient and hindering economic growth and activity,” Mr Barr said.

“Insurance duties increase the price of insurance and can result in some consumers being underinsured because they are unable to afford the level of cover they would prefer.”

The Government says it will replace the stamp duty revenue through commercial and residential general rates. In 2011/12, the last year before the phase-out began, duty on general insurance raised $44.92 million and duty on life insurance raised $2.09 million.

An ACT household paying about $2500 a year in house and motor vehicle cover would have saved about $200 since the reforms were introduced.

Mr Barr says the ACT is leading the way in creating a fairer, simpler and more efficient tax system, which is building greater fiscal and economic sustainability for the territory.

The abolition of insurance duty was recommended in the 2010 Henry taxation review and an ACT tax review in 2012.